Thursday, August 18, 2011

Thinking about inflation

Source: Wolfram Alpha
The United States Government has experienced high rates of inflation from time to time over history, as is shown in the graph above. There were high rates of inflation associated with World War I and World War II and a high rate of inflation related to the Viet Nam War and the oil shocks of 1973 and 1979.

I find I don't understand the relationship between monetary policies of the Federal Reserve, fiscal policy of the federal government and the control of the money supply, as they affect the inflation rate. I wonder how many of the other people commenting on our debt problem fully understand the complex processes that control inflation, and the impact of inflation on the growth of the economy.

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